Osaka-based asset manager, Nippon Capital Asset Management J-LLC has told institutional clients that while quantitative easing may be a boon for stocks, it has shown that it is largely ineffective as a means of boosting Japan’s economy.

The Bank of Japan has pursued the policy more nearly two decades to varying degrees but the last three years since Shinzo Abe’s rise to power have seen the central bank significantly amplify the scale of QE as well as broadening the scope of assets it buys in its efforts to create price inflation in an economy that has been blighted by deflation since the financial collapse of 1989-90.

“The Bank of Japan, under Haruhiko Kuroda, is trying to create a scenario in which prices are rising in an economy in which consumers think prices are already too high,” exclaimed Charles Worth, Executive Vice-President and Co-Chief Investment Officer at Nippon Capital Asset Management J-LLC.

Japan is also the world’s most indebted advanced economy with trillions of dollars’ worth of government debt; debt, which the International Monetary Fund has described as “unsustainable”. The Abe government, faced with the unenviable task of finding a way to service the debt and meeting unfunded liabilities like welfare for Japan’s ageing population, raised a sales tax from 5% to 8% in April 2014. A further rise – from 8% to 10% - was planned for 2015 but Mr. Abe took the country to polls seeking a mandate to postpone the increase until the economy has sufficiently strengthened.

Despite Nippon Capital Asset Management J-LLC’s skepticism on the effectiveness of quantitative easing, it says the impact on equities and other risk assets is “undeniable”. Clients have been advised to continue to hold Japanese stocks in anticipation of fresh stimulus from the Bank of Japan before the end of 2015.

About Nippon Capital Asset Management J-LLC
Nippon Capital Asset Management J-LLC is a ‘fee only’ financial advisory service. This way you can be assured that we are acting in your best interests at all times. Other services have ‘special’ relationships with banks and financial institutions, from which they are paid a negotiated percentage of any deals that they broker on their behalf. These third party arrangements distort how investments should be dealt with presenting a clear conflict of interest. We do NOT operate in this manner and offer total commitment to our valued clients, without receiving any compensation from third party sources in the industry.

Nippon Capital Asset Management J-LLC operates under the strict guidelines of the Fiduciary Standard of Care (FSC). We are bound to a code of conduct that holds the clients interest in paramount position.